Introduction
The strategic location of the island of Cyprus and its considerable wealth in ancient times have made it subject to occupation by several different nations and civilisations. These occupations began many centuries before Christianity and ended in 1960 when the island became an independent republic, after 82 years as a British colony. Although the invasion of the northern part of Cyprus by Turkey in 1974 had a traumatic effect on different areas of growth, it did not hinder the economic development plans launched in 1962.
Strategic planning for economic development continues to be an essential goal of the Cypriot government. The importance of international trade and foreign investment as vehicles to offset the losses suffered by the economy of Cyprus following the Turkish invasion in 1974 was recognised at once. Foreign investment, whether direct or indirect, or in or through Cyprus, in the form of financial capital and human resources, as well as technology, know-how, and expertise was, therefore, greatly encouraged.
On 1 May 2004, Cyprus was admitted to full membership of the European Union (EU). On 1 January 2008, it adopted the euro as its national currency. In the run-up to EU membership, in order to attract inward investment and enhance economic prosperity in Cyprus, the government liberalised foreign direct investment policy for both EU and non-EU nationals. In all but a very few strategic sectors of the economy (ie, those perceived to relate to national and public security, such as banking and media), foreign investors may now participate with no limits on equity holdings and without any prescribed minimum level of capital investment. In general, foreign investors no longer need approval from the Central Bank of Cyprus as was previously the case, and they may invest and do business in Cyprus on equal terms with local investors.
In 2006, Cyprus enacted legislation to allow the formation of European public limited companies (SEs) in line with EU Council Regulation 2157/2001. The aim of the SE regime is to allow companies incorporated in different member states (and in Iceland, Liechtenstein, and Norway) to avoid the legal and practical constraints arising from the existence of different national legal systems and to merge or form a holding company or joint subsidiary that is able to operate throughout the internal market and beyond. Incorporation as an SE can significantly reduce the costs for businesses operating in more than one member state of the EU and allow them to restructure quickly and easily to exploit the advantages presented by the internal market. One of the major factors determining the attractiveness of an SE is the tax regime of the host country. Cyprus's low tax rates, its extensive network of double-taxation agreements, and its simple, modern tax legislation make it extremely attractive as a location for SEs. It is, therefore, likely that businesses from all over Europe will find it advantageous to re-incorporate as Cyprus SEs. Existing companies from other member states may be merged into an SE in Cyprus without any tax cost, since Cyprus has fully implemented the EU Mergers Directive. To further facilitate inward investment, the Ministry of Commerce, Industry and Tourism has established a 'one stop shop' Foreign Investors Service Centre tasked with co-ordinating and simplifying potential investors' dealings with the authorities.
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